What Is Builders Risk Insurance & Do I Really Need It?

Everything You Need to Know Before Starting Your Construction Project

Starting a new construction project? Whether you're building a commercial space, a custom home, or renovating a property, you're exposed to risk the moment materials hit the site. Fires, theft, weather damage—even vandalism—can derail your budget and timeline. That’s why builders risk insurance (also called course of construction insurance) is one of the most important coverages to consider before breaking ground.

But many project owners and builders are left wondering:
Do I really need it? What does it actually cover? And who should be responsible for purchasing it?
Let’s break it down.

What Is Builders Risk Insurance?

Builders risk insurance is a type of property insurance that covers buildings and structures during construction, renovation, or repair. It’s typically written for a specific project and timeframe, usually 3, 6, or 12 months.

It covers damage to:

Buildings under construction
Materials on-site, in transit, or stored off-site
Temporary structures like scaffolding, fencing, and signage
Fixtures and equipment waiting to be installed

Coverage typically kicks in once construction begins and ends when the project is completed or occupied.

Who Needs Builders Risk Insurance?

This is a common point of confusion. The party with the most at stake should typically carry the policy. That could be:

The property owner or developer (especially if financing the project)
The general contractor, if contractually required
Sometimes even subcontractors, for specific project components
In joint ventures, a co-named policy is common

Pro tip: Always check the contract and discuss with your insurance advisor to clarify who’s responsible.

What Does Builders Risk Cover?

Here’s what’s typically included:

Fire and lightning
Theft and vandalism
Wind, hail, and some weather damage
Explosion or impact by vehicles
Water damage (from burst pipes or rain, not flooding)
Debris removal and pollutant cleanup
Valuable documents and construction signs
Soft costs (extra interest, permit fees, etc.—if endorsed)

But beware of exclusions. Most policies do NOT cover:

Earthquake or flood (unless added)
Faulty workmanship or design (though resulting damage may be)
Wear and tear
Acts of war or terrorism
Employee theft (often needs a separate fidelity bond)

How Much Does It Cost?

Premiums driven by the total cost of the completed project value. However, the pricing can vary greatly depending on:

Construction type (frame vs. fire-resistant materials)
Location and natural disaster risk
Duration and value of the project
Security measures (fencing, alarms, cameras)

Examples:

A $1 million residential project could cost $1,200 - $4,000.
A $3M commercial build could cost $2,500 - $6,000 for builders risk coverage.

When Should You Buy It?

This is critical:

Too early, and you’re paying for idle time before ground breaks.
Too late, and you might not be covered if damage happens mid-project.

The best time to bind the policy is right before the first materials are delivered or any site work begins.

Real-World Scenario: No Coverage, Big Problem

A builder began foundation work in early spring. Due to a delay, the policy was bound a week late—right after a windstorm knocked over framing and caused $60,000 in damages. The insurer denied the claim because the damage occurred before coverage began.

Lesson? Don’t wait to get this done.

Final Thoughts: Don’t Build Without a Plan

If you’re a property owner, general contractor, or developer, builders risk insurance protects the financial investment in your project. It’s not just a box to check—it’s part of a smart risk management strategy.

Work with an insurance advisor who understands the nuances of construction policies and can tailor coverage to your project’s size, location, and complexity.

Ready to Protect Your Build?

Want help reviewing or quoting a builders risk policy? Let’s talk. Our team helps construction clients across Michigan and beyond avoid gaps, overpaying, and costly delays.

If you're ready to start vetting your insurance options, we’re here to help - contact us today or request a quote and we’ll walk you through what makes our agency different.

If you’re looking for and insurance agent in Michigan. You may also like to take a look at these great resources for insurance: